Posts Tagged ‘CA TRECs’

Will the California RPS and TREC program promote solar and SRECs?

Posted November 30th, 2011 by SRECTrade.

Many solar advocates are hoping that the California TREC program will boost solar development the way SREC markets have in the country’s fastest growing solar markets on the East Coast. After much delay, the program is finally set to launch on December 10th. Unfortunately, the odds are stacked against the distributed solar industry and here is why:

The first hurdle was whether or not the California Public Utilities Commission (CPUC) would allow distributed generation (DG) projects to be eligible for the state Renewable Portfolio Standard (RPS). For the sake of clarification, DG is often referred to as smaller, commercial size projects, but in California, the technical definition extends to all projects that are considered onsite generation, meaning the electricity produced by the system is used locally, rather than transmitted through the broader electricity grid (think residential, small commercial and community solar projects. Based on recent proposed revisions (pdf), the CPUC will likely approve DG projects for RPS eligibility and has already started to layout the process for approving projects (a service that will be provided by SRECTrade).

The next hurdle centers around how DG TRECs are classified within the RPS. There are three categories used for RPS compliance:

  1. In-State: At least 50% of the renewable energy must be sited in California.
  2. Out-of-state: Up to 50% of the renewable energy can come from projects outside California that supply electricity to the California grid.
  3. TRECs: Up to 25% of the RPS can be met through the purchase of Tradable Renewable Energy Certificates, a cap that will be reduced to 10% by 2020.

This is a key battle for the relevance of TRECs in supporting DG projects in California. Proponents for DG have argued that TRECs from in-state distributed projects should be included in the 1st bucket. A few reasons supporting this position include the added benefits from reduced transmission costs inherent in DG projects and the fact that the state should favor supporting distributed renewable energy projects sited in California over utility-scale projects outside of California. In a rare occurrence, advocates for the solar industry and the major utilities in California share this opinion. The only opponents we can think of are regulators and lawyers choosing a strict interpretation of a poorly written portion of a legislative mandate and unfortunately, it appears the only way to fix this would be to go back to the legislature. It is likely that the legislature envisioned tradable RECs as those coming from systems sited outside of regional territories and/or outside the state of California, without proper consideration for what that meant for legitimate, local, distributed renewable projects. The CPUC is scheduled to vote on this issue tomorrow, December 1st ahead of the December 10 launch.

The impact of this decision will effectively curtail the ability for distributed solar projects to count towards the RPS, while also making TRECs a non-factor in the financing of distributed solar projects. The RPS incentive scheme will first favor utility-scale hydro, wind and solar from within the state borders, followed by counterparts outside California and then, TRECs produced by renewable facilities anywhere in the Western U.S. and a portion of Canada (WREGIS). This means TREC prices will be next to nothing and the market will be dominated by regional utility-scale hydro and wind projects able to produce at a much larger scale than local DG solar. To put that into perspective, the fastest growing solar markets in the U.S. today (SREC states driven by RPS laws such as New Jersey, Pennsylvania and Massachusetts) are made up primarily of DG solar projects! As a result, California will need to find ways outside the RPS to encourage the growth of distributed solar energy. This most likely means a continuation of short-term, taxpayer funded, grant/rebate based programs like the California Solar Initiative (CSI).

Even if the CPUC decides to include DG in the in-state bucket, questions still exist around whether or not the potential TREC values will be enough to impact solar DG development. Compared to other states, California is backward in its approach to DG projects. Here we have an industry fighting to be on a level playing field with utility-scale renewables, where other states (16 at the most recent count) have DG or solar set-asides that recognize the value of distributed generation and favor it in their RPS incentive structure over utility-scale renewables. We have often written about the need for a solar carve-out specifically because of different cost structures and the need to support solar separately. The reality is that wind and other distributed renewables have traditionally been more cost-effective, and therefore more competitive within DG carveouts. In addition, the small-scale inherent with solar relative to wind or hydro add transaction costs that also favor the larger producers. Even in an ideal world, where California distributed solar is in bucket #1, the fear is that it will be crowded out by large scale producers with cheaper alternatives to solar and lower transaction costs. The hope has always been that the RPS and the TREC program could be a stepping stone towards a solar-only SREC program in California with long-term, sustainable growth targets similar to those seen on the East Coast.

California TRECs – Making a Comeback

Posted September 13th, 2010 by SRECTrade.

TRECs in CA

On August 25th, the California Public Utilities Commission (CPUC) issued a Proposed Decision (PD) to lift the moratorium on Investor Owned Utilities (IOUs) utilizing Tradable Renewable Energy Credits (TRECs) to meet California’s Renewable Portfolio Standard (RPS). In addition to allowing IOUs to use TRECs for RPS compliance purposes, the CPUC’s PD increased the initial 25% TREC limit to 40%. Based on the petitions submitted by the IOUs and the Independent Energy Producers Association (IEP), the CPUC decided to take the IOUs’ points into consideration and increase the cap to 40% of the annual procurement targets. The utilities argument for increasing the cap was based on the thought that accessing a larger market for renewables will lead to a reduced overall cost.

The CPUC has maintained a December 31, 2011 expiration date for the 40% cap. Additionally, the temporary $50 limit of payments for TRECs is to remain in place through the same time period. The CPUC notes that at this point in time both the cap and the price limit are set to expire unless the CPUC takes action to extend or modify it.

Timing

The Proposed Decision will not be on the CPUC’s voting meeting agenda for at least 30 days from the date the PD was issued.

What this means for CA SRECs

Although the implementation of a TREC market in California is a step in the right direction for SRECs, it does not provide the same market dynamics created by a RPS solar carve out as implemented in the other SREC states. Typically, in a general REC program, as structured by the CPUC, larger capacity renewable energy projects, such as wind, dominate the market. Additionally, the current guidelines instituted by the California Energy Commission (CEC) and CPUC on RPS project eligibility do not include customer-side distributed generation (i.e. the majority of residential and commercial rooftop solar systems).

The CEC RPS eligibility guidebook states that both the CEC and CPUC play a role in determining RPS implementation for renewable distributed generation (DG) facilities. The good news is that both the CPUC and CEC allow system owners to retain 100% of the RECs associated with the energy produced even if the owner has participated in a ratepayer-funded program such as the CPUC’s California Solar Initiative (CSI) or the CEC’s New Solar Homes Partnership program. The bad news is that these systems are considered DG facilities and are not RPS eligible unless the CPUC authorizes TRECs to be applied to the RPS.

Now you might be thinking that the proposed decision issued by the CPUC is good news for distributed generation solar, but unfortunately like a lot of things in the REC world it isn’t that clear cut. The PD issued by the CPUC states that, “although there are technologies that can be used for customer-side renewable DG, most current installations are not in fact RPS-eligible because they have not been certified by the CEC.” Seems like a circular argument, but this is what the most recent documents state. The PD goes on to provide similar detail as the CEC that states, “in anticipation of the eventual use of customer-side DG for RPS compliance” the system owner will maintain full control over the RECs associated with their renewable energy generation.

Based on both the PD issued by the CPUC and the revised CEC RPS eligibility guidebook it appears that the groups intend to incorporate distributed generation into the RPS compliance program, but are not ready to make the commitment at this point in time. This appears to follow in line with the process California has taken in implementing a REC market. As indicated by our guest blogger, David Niebauer, California has taken its time in launching a REC program; SB 107 was passed in 2006 and gave the CPUC express authority to use TRECs for RPS compliance. It appears that the CPUC and CEC want to get a feel for how the existing structure of the TREC market will play out before approving DG projects or potentially creating a DG/Solar carve out.

Implementing a CA SREC Program

But couldn’t the CPUC and CEC approve distributed generation projects, create a carve out for these technologies, and slowly increase or reevaluate the requirements over time? From our perspective this would be great and act as a catalyst to continue pushing residential and commercial solar in the state of California. Not only would a solar carve out help increase the generation of renewable electricity, New Jersey is second to California in solar installations, but it would help push a strong solar economy in California. In the PD, the Alliance for Retail Energy Markets (AReM) states that, “…CSI will have provided incentives for approximately 1,100 GWh by 2011.” Based on 2008 electricity figures, 1,100 GWh equates to approximately 0.4% of California’s total electricity sales. This is 0.4% that will not be counted towards meeting California’s RPS targets. Hopefully the CPUC and CEC will consider the implementation of a solar/distributed generation carve out and help drive a strong solar industry in California while achieving the RPS requirements CA’s IOUs are required to meet.

CA RPS Eligible Solar

Solar systems that do not fall into the customer-side DG category may be RPS eligible and could be qualified to participate in the CA TREC market.

We are constantly staying on top of developments in the CA market and are currently working on solutions for both CA RPS eligible and ineligible solar generating units. For more information please contact us at 877-466-4606 or customerservice@srectrade.com.

For access to the CPUC Proposed Decision click here. For access to the revised, draft CEC Renewables Portfolio Standard Eligibility guidebook click here.

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California TREC Market Held Up

Posted June 29th, 2010 by SRECTrade.

On May 6, 2010, the California Public Utilities Commission (CPUC) released its decision to stay the prior decision authorizing the use of tradable renewable energy certificates (TRECs) for compliance with the state’s renewable portfolio standard (RPS) program. This decision came after the April 23, 2010 workshop presentations, in which California’s IOUs discussed the valuation components and calculation of REC pricing.

The decision will be stayed pending resolutions of two petitions 1) the joint petition filed by Southern California Edison Company, Pacific Gas and Electric Company, and San Diego Gas & Electric Company (the utility petition) and 2) the petition filed by the Independent Energy Producers Association (IEP).

As outlined in the CPUC’s decision, the petitions filed look to address the following points:

The utility petition seeks to:

  • Revise the criteria for what transactions are bundled and what can be unbundled for TREC trading
  • Apply the criteria only to contracts submitted for approval after the effective date of the decision
  • Eliminate the temporary limit on TRECs for compliance with the RPS by the large utilities
  • Expand the rules for “earmarking” TREC contracts to address current short-fall with future generation

The IEP petition seeks to:

  • Revise the criteria for bundled and unbundled transactions with revisions different from the utility’s petition
  • Expand the review of the least-cost best-fit methodology for RPS bid evaluation and set a time for its completion

In addition to the subjects the petitions seek to address, the decision also included the concurrences and dissents of the CPUCs commissioners. The full document can be viewed here.

SRECTrade will continue to watch the CPUC’s decision making process and provide updates as they become available.  We will maintain everything we know about it on our California SREC page.